The introduction of a cap on excessive early exit fees for those accessing retirement funds under new pension freedoms rules in the UK met a mixed response.

The announcement by Chancellor George Osborne is no doubt welcomed by investors and some advisers too.

The freedoms introduced in April last year enables those over the age of 55 with defined contribution plans complete access to their pension pots.

However, high early exit fees have in some cases presented a significant obstacle to savers looking to take advantage of the new rules or simply to switch funds.

Pension freedoms – one of the most radical overhauls of the pensions landscape in recent years alongside auto-enrolment – were intended to deliver choice and flexibility. But some manufacturers have been charging early exit fees which, it is claimed, merely add a layer of restriction and run contrary to the changes.

So news of the Treasury’s cap, which will be implemented by the FCA, is to be welcomed by consumers intent on accessing their savings early and who w ill now be able to enjoy what pension freedoms implemented last year were intended to introduce: Liberté!

“We’ve listened to the concerns and the newspaper campaigns that have been run and today we’re announcing that we will change the law to place a duty on the Financial Conduct Authority to cap excessive early exit charges for pension savers,” the Chancellor said in the House of Commons.

“We’re determined that people who’ve done the right thing and saved responsibly are able to access their pensions fairly.”

The cap, which will be introduced via legislation, will likely be greeted with cheers by a portion of the adviser community too, some of whom have seen significant numbers of clients impacted by early exit charges.

An adviser survey conducted by AJ Bell found that just under half said some clients had been hit with exit penalties when making use of pension freedoms.

And some asset managers and platforms will likely tip a cautious thumbs-up to the Chancellor’s announcement. Such providers stand to benefit from the injection of fresh cash into the system resulting from the pension freedoms so anything that unblocks the flow of funds will presumably be welcomed.

However, pension providers are unsurprisingly not happy.

In fact, there has been a heavy backlash. Some insurers feel that the sector has been unfairly targeted by a misinformed government bowing to populist pressure.

They point out that rather than cynically ripping off consumers they have merely been charging fees that have been clearly set out in contracts.

Some of the exit fees in the Treasury’s firing line date back to legacy policies from the 1980s. The legal ramifications of the plan to cap such contractually-obliged fees are unclear but the Treasury could face fierce resistance and perhaps a protracted battle in the contract law arena.

And with FCA figures showing that the overwhelming majority of pension savers will not need to pay exit penalties, and only a very small minority facing high fees, there is concern that Osborne is using a sledgehammer to crack a nut.

So there is a need for context and balance. The emotive language used in the cap announcement – “ripped off”, “prohibitive”, “excessive” – also risks tarnishing the insurance industry’s reputation.

Nonetheless, the announcement comes on the back of a government consultation into early exit fees and at least demonstrates that the Treasury is doing just that – consulting.

Some people might argue the Treasury’s decision to introduce a cap shows that it is at least taking a pragmatic and common sense approach to address some of the unintended consequences resulting from a radical regulatory revamp that remains a work in progress.

While different in nature and scope, there are echoes of the FCA’s announcement that it is considering reintroducing commission in what would amount to a major redrawing (read U-turn!) of the RDR.

Viewed together, these different initiatives hint at a government and regulatory regime attempting to be more in tune with the concerns and needs of consumers and certain industry stakeholders.

A policy of listening and consulting, rather than doggedly sticking to one’s guns in the face of mounting consumer discontent, is commendable in principle.

And if the fallout from the RDR has helped foster a somewhat different mind-set and culture within the walls of Canary Wharf and the Treasury then at least this shambolic piece of legislation may have some sort of positive legacy.

No doubt further unforeseen issues will arise from the ongoing reconstruction of the pensions landscape and the government and regulators alike will need to be at their pragmatic best to tackle these.

The cap on excessive early exit fees could be viewed as part of a tweaking and fine-tuning process undertaken by a Government wading into largely uncharted pension waters. Such flexibility will need to be demonstrated when fleshing out upcoming reforms to pension tax relief.

The introduction of a flat rate system or an Isa-style pension system will likely come with teething issues or unintended consequences.

But a balance needs to be struck so that amending does not become meddling. Such tweaking must be done in a measured way so as to not over-complicate an already complex and at times bewildering pensions system. The end goal should be stability, simplicity and fairness. And that means fairness to insurers as well as consumers.

Meanwhile, many questions still linger over the plan to cap early exit fees – such as the level of the cap (the definition of “excessive” could prove problematic) and when it will come into effect.

The latter question is especially pertinent for savers seeking access retirement funds but unsure of whether or not to wait for the introduction of the early exit fee cap.

And while some say the cap does not go far enough – and advocate a complete ban of early charges instead – others are obviously of the opinion that it is too draconian.

Like all things regulatory, the devil will surely be in the detail.

In the meantime, the devil for the Treasury will be in the form of an insurance sector up in arms and likely planning a fierce counter offensive.